Define benefit pensions

Define benefit pensions

Question

Assalamu Alaikum Wa Rahmatullahi Wa Barakatuh

Dear Beloved Shaykh,

I pray and hope you are well. Please kindly could I ask you a question regarding pensions?
I recently started a new job and have been put me on a pension with LGPS, I have done some research and it is a defined benefit pension scheme. Is it permissible to have such a pension and is Zakat compulsory on it, if so, how does that work out.

Secondly my previous Job also had a pension, and I was joined in it, I opted out of it but paid 154.123 into the pot i will receive that back when I reached 55, Do I give zakat on that also?

what is your advice shall I stay in or opt out of the pension.

I would be highly grateful for your response.

Jazkallah

Humbly requesting Duas

Some links regarding the Pensions

https://www.lgpsmember.org/ats/about-gov.php

https://www.islamicfinanceguru.com/investment/is-my-pension-halal-a-really-really-simple-guide-ifg/


Answer

If your pension scheme is a defined benefit scheme then it will be permissible for you to join the pension scheme. You will not have to pay any zakat on the funds until you receive pay-outs. Once you start getting paid from the pension you will add the received sums to any other zakatable assets you have and pay zakat accordingly. You only have to pay zakat from the time you receive the money and do not have to back-date.

As for your previous pension, you will pay zakat on the total amount each year.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel